Control during corporate crisis: asbestos and the Manville bankruptcy

Our plain-English summary of Control during corporate crisis: asbestos and the Manville bankruptcy, by K.J. Delaney (International Journal of Health Services, 1991).

The study

• Author: K.J. Delaney
• Journal: International Journal of Health Services
• Published: 1991;21(4):697-716
• Type of article: Review
• Read it: PubMed · Publisher

Abstract

Chapter 11 bankruptcy provides an opportunity for addressing issues of power and control during corporate crisis. A broad notion of power is essential in understanding the complex events that led to the Chapter 11 filing of the Manville Corporation, formerly the nation's leading asbestos manufacturer. The theory of finance hegemony places this case in an entirely new light by taking into account the power of the financial community. The Manville bankruptcy illuminates several mechanisms by which this hegemony operates. From this perspective, Chapter 11 bankruptcy is viewed as a choice made from a set of options severely constrained by other powerful institutions, rather than a result of managerial incompetence or market failure.

In plain English

This article is a sociological case analysis, not a medical study. The author used theories of corporate power, chiefly "finance hegemony," to examine why the Manville Corporation, described as the nation's leading asbestos manufacturer, filed for Chapter 11 bankruptcy on August 26, 1982, when more than 16,500 lawsuits were pending against it. The author reported that the company held $600 million in insurance coverage, but from the late 1970s its insurers refused to pay out on awards. Manville was also unable to get Congress to pass a federal compensation bill. A board subcommittee then replaced the company's auditors, after which Manville stated that its future asbestos liabilities could be estimated, and its debt rating fell from A3 to CA. Under the 1987 reorganization plan, commercial creditors received full payment plus interest. Asbestos victims received a pool of over $2 billion, which the author said provides $30,000 to $50,000 for each of an estimated 40,000 to 60,000 claims. The author concluded that the decision to file was greatly influenced by commercial creditors and insurers, while noting that financial dominance of the broader economy remains to be proven.

We wrote this plain-English summary from the full article with the help of AI, and a second AI model checked each sentence against the article. It is not the authors' wording; the abstract and the article are their own account.

What the study did and found

• Design: Sociological case analysis of a corporate bankruptcy, interpreted through theories of corporate power and control (not a medical or epidemiological study)
• Who was studied: The Manville Corporation (formerly Johns-Manville), a U.S. asbestos manufacturer. It filed for Chapter 11 bankruptcy on August 26, 1982, and its reorganization plan was approved in 1987.
• Exposure: Not a health-exposure study. The subject is asbestos health liability litigation against Manville; no fiber types are specified.
• Main results:
  • Before the filing, Manville held at least $600 million in insurance coverage, and damages paid out before August 1982 did not come close to this figure.
  • From the late 1970s, Manville's insurers refused to pay out on awards, disputing the "trigger date" of coverage.
  • Manville was unable to gain passage of the Asbestos Workers Recovery Act, a federal compensation fund bill it supported.
  • A board subcommittee replaced the auditors Coopers & Lybrand with Price Waterhouse. Manville then told the Securities and Exchange Commission that future asbestos liabilities could now be accurately estimated.
  • Manville's long-term debt rating from Moody's dropped from A3 to CA.
  • Under the 1987 reorganization plan, commercial creditors received 100 percent of the money owed them, plus interest.
  • Asbestos victims (current and future) received a pool of over $2 billion, funded by Manville and its insurers but not by the federal government. The author stated this provides $30,000 to $50,000 to each of an estimated 40,000 to 60,000 asbestos claims.
  • Common stockholders lost 80 percent of the value of their stock in a reverse split and retained 20 percent. Shareholders voted against the plan, which was imposed through the bankruptcy code's "cram-down" provisions.
• The authors' conclusion: The author concluded that in times of corporate crisis, the power of financial interests can provide decisive control over a firm's actions by severely constraining its options. In this case, Manville's decision to declare bankruptcy was greatly influenced by its commercial creditors and insurers.
• Limitations the authors state:
  • The author states that the case for financial dominance of the broader economy remains to be proven.
  • The author states there is little evidence of bank control throughout Manville's corporate history.

Topics

Medical terms in this study, explained in our Lexicon: Chapter 11.

Related studies

• Occupational risk factors for mortality from stomach and lung cancer among rubber workers: an analysis using internal controls and refined exposure assessment — K. Straif, L. Chambless, et al. (1999)
• A case-control study of renal cancer mortality at a Texas chemical plant — G.G. Bond, R.J. Shellenberger, et al. (1985)
• A case-control study of lung cancer at a dye and resin manufacturing plant — F. Barbone, E. Delzell, et al. (1992)
• Cause-specific mortality among male chemical workers — G.G. Bond, E.A. McLaren, et al. (1987)
• Potential significance of airborne fiber dimensions measured in the U.S. refractory ceramic fiber manufacturing industry — T.J. Lentz, C.H. Rice, et al. (1999)
• Dangerous and cancer-causing properties of products and chemicals in the oil refining and petrochemical industry: Part V--Asbestos-caused cancers and exposure of workers in the oil refining industry — M.A. Mehlman (1991)

Browse more research in International Journal of Health Services, or return to medical research.